The Airport Authority on Friday announced plans to offer HK$5 billion in retail bonds to fund capital expenditures, including its third-runway project.

The bonds, with a tenor of two-and-a-half years, will generate interest payments every three months with a fixed yearly rate of 4.25 percent.

From January 17, Hong Kong residents will be able to subscribe in HK$10,000 increments through placing banks, securities brokers or the Hong Kong Securities Clearing Company Limited, with HSBC and Bank of China (Hong Kong) as the co-arrangers.

"Retail bonds obviously have a little bit more technical challenges, including a longer subscription period. This year, incidentally, we have a Chinese New Year that's actually happening in February. So I think that's obviously quite incidental that this year, January, could be quite appropriate an opportunity that we could issue this bond," said the authority's finance executive director Julian Lee.

"As you can see that we have issued institutional bonds earlier. I think that somewhat established the confidence that professional investors have in the Airport Authority. And I think hopefully that would provide some confidence for the retail investors."

Arnold Chow, deputy general manager of the personal digital banking product department at Bank of China (Hong Kong), said he expects an overwhelming market response and potential over-subscription.

"We expect that the US (interest) rate hike has been reaching the peak. With the general expectations that the rate will be decreasing over the next few years, I think the retail customers will find it's a very good [opportunity] to lock in 2.5 years for a fixed coupon 4.25 percent per annum. It will be a good opportunity to lock in a return for a relatively longer tenor," he said.

Subscription of this batch of retail bonds will close on January 25. The bonds will be issued on February 5 and listed on the Hong Kong Stock Exchange the following day.